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The following article is a draft of one that will appear in Left Business Observer #116, forthcoming later in August 2007. It retains its copyright and may not be reprinted or redistributed in any form - print, electronic, facsimile, anything - without the permission of LBO.


Reflections on the current crisis

Quite a few weeks the financial markets have had. What’s it all mean?

The Internet left is getting all heated up—this is the Big One, the End of the World, the Death Agony of Capitalism. Maybe; that’s always possible. But it’s not likely.

And measured by the stock market, as the graphs show, the crisis looks big in the short term...

...but virtually disappears in the long (as does the 1987s stock market crash).

A technical analyst of the stock market might look at the long-term chart and see a weak new high in nominal terms and a failure to match an old high in real terms, something that if confirmed, might be something to worry about.

Roster of crises

We’ve been here, or something like here, several times over the last 25 years. There was the financial rout of the early 1980s, inspired by Paul Volcker’s highly successful strategy of killing 1970s inflation by strangling working class power. It culminated in Mexico announcing that it could no longer service its foreign debts, the moment of onset of the Third World debt crisis of the 1980s. There were repeated worries it would bring down the whole global financial system. Some banks took some earnings hits, but capital—personified by the U.S. Treasury and the IMF—turned the crisis to its advantage